On July 29th, 2024, the Kingdom of Spain ratified the agreement with the Republic of Paraguay to avoid double taxation and prevent tax evasion. Paraguay, for its part, had already ratified it on May 29th, 2024 through Law No. 7,271.

This represents a new advancement so that the agreement, signed on March 25th, 2023, during the XXVIII Ibero-American Summit in Santo Domingo, enters into full force on January 1st, 2025. Previously, both parties must notify each other in writing and through the corresponding diplomatic channels that all the steps for the validity of the agreement have been completed, which will be given ninety days after the last notification.

The agreement applies to income taxes payable by each of the contracting states. In the case of Paraguay, the taxes covered are:

  1. The Corporate Income Tax (IRE).
  2. The Tax on Dividends and Profits (IDU).
  3. The Non-Resident Income Tax (INR).
  4. The Personal Income Tax (IRP).

In Spain, it applies for the following taxes:

  1. Personal Income Tax (IRPF).
  2. Corporate Income Tax (IS).
  3. Non-Resident Income Tax (IRNR).

The agreement is aligned with international standards developed by the Organization for Economic Cooperation and Development (OECD) and contemplates measures to prevent tax base erosion and profit shifting. It also establishes a framework for exchanging tax information between the competent authorities of both countries, contributing to greater transparency and cooperation in tax matters.

This agreement is an important step in consolidating bilateral relations between Paraguay and Spain. It provides a more secure and predictable environment for investors from both countries. Implementation of this agreement is expected to boost trade and investment, thus benefiting the economies of Paraguay and Spain.